0 APR FOR THE SHORT TERM ONLY

2007-03-08 10:33:40

( Financial )



The Federal Truth in Lending Act requires lenders to show the computation of interest rates in annual percentage rate to allow comparison across lenders. It allows borrowers to shop for the best loans and apply with lenders offering the lowest interest rates. The annual percentage rate abbreviated APR is the true effective interest rate per year on loans. The uniformity of computation on the APR helps borrowers to compare interest rates from various lenders.

Zero percent APR is usually offered as introductory benefit to credit card applicants. Credit card holder will not pay any interest on purchases for certain period usually a year. But do not get too excited with the 0 APR. It will not last and it does not mean you will not pay any charges for using the credit card. Standard charges are still applied on your credit card usage such as annual fees and late payment fees. These fees can add up to the amount of your purchases and can still shoot up expenses.

Do not look at 0 APR as the sole basis in applying for a credit card. Remember that this benefit is provided on the short term only. Eventually you will pay the real APR on your credit card balance. Apply for a credit card that meets your requirements. Consider how you plan to pay for the credit card balance. Will you pay it in full each month or pay it on installment? An APR calculation might be costly for you if you plan to pay it in full each month. You will begin paying for the real APR after the 0 APR benefit ends. The APR will only be relevant if you pay on installment every month. Otherwise important consideration must be given to annual fees, transaction fees and the grace period.

Wider acceptance of the credit card should also be taken into consideration. This factor is particularly important for frequent travelers and for purchasers of wide variety of items. Some places and establishments only accept certain credit cards. So make sure you apply for credit cards with wide acceptance in several areas.


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